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By DK AggarwalWith only a few months left for the general elections, the Modi government has expectedly announced some measures to provide relief to distressed farmers and individual taxpayers in the recent Interim Budget.

Budgetary allocations were also announced for farmers, the middle class and small and medium enterprises, and they are expected to boost consumption and investor sentiments.

RBI's recent surprise decision to cut interest rates by 25 bps is a pre-election stimulus gift from the central bank for Prime Minister Narendra Modi. With the general elections scheduled for May amid a host of global factors, there could be heightened volatility in the market. As history repeats itself, the stock market always favours a stable government and good economic reforms.

At present, investors are factoring in a BJP win in the 2019 general elections. If the outcome is in the favour of the BJP, this is likely to push the market higher. The basic growth drivers of the Indian economy will always remain in the limelight no matter which government comes to power.

Also, global cues will continue to impact the Indian stock market, before and after the elections. As global volatility and the fact that India gets a reasonable part of foreign flows as part of emerging economies, a decisive government at the Centre would boost further flows.

The pre-election phase seems to be creating an opportunity to create wealth. At this juncture, investors should use this chance to build a solid portfolio of quality stocks that have attractive valuation and bright fundamentals for the long term. Largecap stocks are better placed than midcap and smallcap stocks to fare relatively better in times of volatility. Largecap stocks may help investors create wealth without taking extra risks or exposing themselves to volatility.

Sectors such as infrastructure, cement, automobile, capital goods, FMCG and other sectors will remain key focus of the government, no matter which party forms government at the Centre. On the earnings front, growth estimate for FY 2019-20 remains positive on the back of an expected recovery in corporate banks’ profitability and a revival in the investment cycle.

The crisis in NBFC companies should boost profitability of corporate banks in the near term. Long-term investors can look at stocks like Reliance industries, ICICI Bank, Bajaj Finance, L&T, HUL, M&M, Bajaj-Auto, UltraTech Cement and UPL.

(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)